Softening Commodities & Inflation Help Markets

While Infosys’ results disappointed the markets, the fall in crude and gold prices have provided some respite to it, as the markets now look forward to the next RBI policy meet, says Amit Bhanot

In these turbulent times, when a huge correction was predicted on the Indian bourses, they have managed to sustain through it. The last fortnight was a highly volatile one. 

However, the declaration of Infosys’ results on April 12, 2013 was a huge disappointment. The market tumbled by more than 300 points immediately after the results. But April 16 saw a turn around, owing to numerous positive signals from various quarters; as the Sensex broke the record of intraday gain (2.11 per cent or 387 points) since September 2012.

The sudden fall in crude and gold prices, inflation moderating to a 40-month low, softening of commodities in the global markets owing to subdued Chinese GDP and the expectations of an inevitable rate cut brought cheers to the bourses.  
The last fortnight saw the BSE Sensex open firm at 18731 points on April 4 and showed a range bound movement till April 11, somewhat predicting India Inc.’s yearly numbers. But on April 12, the Sensex experienced a steep fall due to Infosys’ results to reach 18144 points on April 15, as investors began off loading. In the succeeding sessions, the markets gained momentum and rose to touch the peak of 18869 points before closing at 18731 points on April 17, thus neutralising the earlier losses. 

Similarly, the NSE Nifty opened at 5640 on April 4 and touched the lowest level of 5477 on April 15. During the next few sessions, Nifty gained consecutively to touch the pinnacle of 5699 on April 17, before closing at 5688, thus gaining the crucial 48 points during the fortnight.   

As far as institutional performance is concerned, FIIs were involved in selective buying. Till April 16, they were the net purchasers of Rs 4 crore with provisional intraday purchase of Rs 592 crore. On the other hand, the Indian mutual funds bought shares worth of Rs 205 crore during this period. The markets remained moderate in terms of combined turnover, as it ranged between Rs 11432 crore and Rs 13368 crore on the BSE and NSE respectively.

In the last 15 days, the international markets performed negatively owing to the declining growth in China. Although the US Dow and Japan’s Nikkei performed well, gaining 1.42 per cent and whopping 8.48 per cent respectively, the other indices showed a consistent decline. Hong Kong’s Hang Seng was the biggest loser with 2.98 per cent decline, followed by Brazil’s Bovespa, Germany’s Dax, South Korea’s Seoul Composite, UK’s FTSE and China’s Shanghai Composite, which lost 2.83 per cent, 2.79 per cent, 2.10 per cent, 1.80 per cent and 0.76 per cent respectively.

Considering individual performance, with its recent optical fibre deal with RIL, RCom gained consistently to be the biggest gainer of the fortnight with 32.61 per cent rise, followed by Jaiprakash Associates, Maruti Suzuki, HPCL and Karnataka Bank, which gained 16.20 per cent, 13.15 per cent, 12.54 per cent and 12.19 per cent respectively. 

On the other hand, a sharp correction in gold has disturbed the gold loan companies, with Muthoot Finance shedding around 33 per cent during the fortnight. Other big losers include Infosys, Wipro, Wokhardt and Bharti Infra that declined by 20.42 per cent, 14.24 per cent, 14.22 per cent and 10.72 per cent respectively. 

Considering the current phase of the markets, it seems quite likely that the Q4 performance of Indian Inc. would have a big impact on the markets, going forward. The next two weeks would be critical, particularly from the IT companies’ perspective. The markets have also taken the rate cuts by RBI for granted, and hence the next RBI policy meet so will be crucial. Investors should thus be watchful of opportunities that have the potential to provide good returns in the long run.